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Human Rights rankings: no perfect company

LiveMint 15-03-2017Sudeep Chakravarti

The first Corporate Human Rights Benchmark (CHRB) ranking for 2017 is finally out. This next big thing in global human rights tracking is well on its way: it hasn’t pulled any punches or run scared of big names.

Quotes in the article

Earlier this week, CHRB unveiled its first formal ranking of 98 publicly-traded companies in three industries that usually contain many of the worst human rights offenders: agricultural products, apparel and extractives. Early plans called for extending this to 500 companies by mid-2018 and to include finance, engineering, pharmaceuticals and the information and communication technology sectors, though I suspect there will be a delay in taking the range that far that fast.

Two Indian companies, Oil and Natural Gas Corp. Ltd and Coal India Ltd are part of the initial ranking, and come in at the lowest score band of below 10% across all parameters and across the three industries covered. They are joined by other extreme laggards: China Petroleum and Chemical Corp., Ross Stores Inc., Kohl’s Corp., Yum! Brands Inc., Grupo Mexico, Macy’s Inc. and Costco Wholesale Corp.—which straddles the agricultural products and apparel sectors. (The rankings and the report can be viewed at corporatebenchmark.org).

Companies were measured on varying weights for various parameters, a methodology refined for some years in consultation with 400 organizations and specialists. A company’s corporate governance and policies, shared equally between board level accountability and policy commitments have been given 10% weight; the same as transparency. “Embedding respect and human rights due diligence” has 25%. Remedies and grievance mechanisms has 15% weight. “Performance” has 40%, shared equally between a company’s human rights practices and “responses to serious allegations”.

The project brings together two big names in the human rights space—the Institute for Human Rights and Business and the Business and Human Rights Resource Centre. These UK-based organizations are joined by Calvert Investments Inc., Aviva Investors, VBDO (The Dutch Association of Investors for Sustainable Development) and Eiris Foundation. The last two focus on advising responsible investment. Since I first wrote about CHRB in this column in late 2015, Stockholm-based Nordea Wealth Management has joined the project, as has Vigeo Eiris, formed after the merger of Eiris and Vigeo, which works in a similar space. Representatives from these organizations form CHRB’s steering committee—CHRB is now formally CHRB Ltd, a registered not-for-profit—with Aviva chairing.

The rankings don’t make for a pretty picture and quite validate the purpose of CHRB. “Only three companies score more than 60%. And the average score is a mere 28.7%,” maintains CHRB’s chair Steve Waygood, who is also chief responsible investment officer, Aviva Investors. “There is clearly no perfect company or industry in human rights terms, and no scope for complacency anywhere. However, it is clear that some are trying much harder than others and we have identified clear leaders and laggards.”

The three companies in the 60-69% range throws up at least two surprises for me, extractives behemoths BHP Billiton and Rio Tinto, alongside Marks and Spencer Group, ranked across both agricultural products and apparel categories. What Waygood calls the average—the great bulge of rankings in the 20-29% band—would make your jaw drop with a sampling of seemingly innocent names among habitual offenders, as it were: Danone, Goldcorp, Christian Dior, Anheuser-Busch InBev, PetroChina, Starbucks Corp., Nordstrom Inc., PepsiCo Inc, Gazprom, Repsol, and Prada.

Just above the bottom three in the 10-19% band are Petrobras, Wal-Mart Stores Inc. and McDonald’s Corp.

“The 2017 results are significantly skewed toward the lower bands,” the report states. “This reflects the relatively early stage that many companies are still at when implementing the UN Guiding Principles and other internationally recognized human rights and industry standards. Nearly six years on from the UN Guiding Principles’ endorsement, this is an important, if uncomfortable, finding.”

This understatement underscores the urgent necessity of efforts like CHRB’s ranking, and the need, as the report suggests, for laggards to “act decisively” so that they can, like the relative leaders, recognize “the moral imperative, business case, and commercial viability of taking action on human rights”.

For my money, “moral imperative” is a bit of twaddle to throw at business. I’m also disconcerted by phrases like “race to the top” for companies to remain competitive in the rankings. As I have written earlier, it is no secret that races to the top of do-good, feel-good rankings are helped along by massive public relations output. Glib corporate commitment and outreach has saved more than one company—even entire industries—from perception and financial ruin. But it could undermine CHRB’s rankings, and that would be a crying shame.

Sudeep Chakravarti’s books include Clear.Hold.Build: Hard Lessons of Business and Human Rights in India, Red Sun: Travels in Naxalite Country and Highway 39: Journeys through a Fractured Land. This column, which focuses on conflict situations and the convergence of businesses and human rights, runs on Thursdays.